Prior to entering into a contract with Caribtex Corp. (Caribtex) (defendant) to process woolen material, Vitex Manufacturing Corp. (Vitex) (plaintiff), a business located in the Virgin Islands, had closed its fabric processing plant due to a decrease in demand. After entering the contract with Caribtex, Vitex re-opened its plant, rehired its work force and took other steps to prepare itself to perform the contract. However, Caribtex failed to deliver the products which Vitex agreed to process and Vitex sued Caribtex to recover lost profits. The District Court of the Virgin Islands found Caribtex in default and awarded damages in the amount of $21,114. The damages were calculated by subtracting the costs that Vitex would have incurred in processing the woolen materials for Caribtex from the gross profits it would have earned had Caribtex performed. Caribtex objected to the trial court’s calculation of damages at trial. Caribtex appealed, asserting that overhead expenses should have been included in Vitex’s costs, and consequently deducted from the amount of gross profits in calculating the damages award.